2012 (11) TMI 437 - AT - Service Tax

Refund of cenvat credit - excise duty on packing materials - appellants have taken credit of excise duty paid in respect of the rice exports made by them Held that - Credit was taken since the appellant felt that instead of claiming the refund they take credit of the duty paid and utilise the same - Rule 5 of Cenvat Credit Rules also provides that when credit cannot be utilised, refund can be claimed - demand for interest and imposition of penalty cannot be sustained Regarding maintenance of guest house and security expenses towards guest house Held that - Prior to the issue got settled that such expenses are not admissible, there were decisions taking a view that service tax credit in respect of expenses incurred for worker s colony etc. are admissible - subsequently the issue has been settled against the appellants, the appellants are required to pay the interest on this amount but no penalty can be sustained Regarding seminar fees Held that - Seminars were related to their business only and prima facie it appears that it is admissible - demand for interest and imposition of penalty as regards seminar fees also cannot be sustained Regarding Share related expenses Held that - It is required to be incurred by any Public Limited Company and it cannot be said that this has nothing to do with business - appellant cannot be found fault with for entertaining bona fide belief about the admissibility and therefore penalty cannot be sustained. Since the appellants are not disputing the denial of service tax, interest would be payable Regarding stock broker service, Entertainment expenses and Membership subscription expenses Held that - Demand for interest in respect of these three items are upheld as not disputed - this is a case where provisions of Section 80 can be invoked - waiver of penalty under Section 80 of the Finance Act allowed - no penalty shall be payable - in respect of all services where credit is not admissible, the appellant shall be liable to pay interest

Summary

Issues:
1. Availment of Cenvat credit on various input services.
2. Dispute over service tax credit.
3. Applicability of penalty and interest.
4. Bona fide belief in the admissibility of certain expenses.
5. Invocation of Section 80 of the Finance Act, 1994.

Analysis:

1. The appellant availed Cenvat credit on various input services from Oct. 2004 to Feb. 2006, including entertainment expenditure, guest house expenses, security expenses, seminar fees, excise duty on packing materials, share-related expenses, stock broker service fees, and membership and subscription service expenses. The revenue alleged that the service tax credit was wrongly claimed, leading to a show cause notice after three years. The appellant paid the amount but disputed the demand for interest and penalty.

2. The Tribunal found that the excise duty on packing materials was legitimately claimed as credit for rice exports. However, for guest house and security expenses, the appellant had a bona fide belief in their admissibility, and hence, no penalty was imposed, only interest. Similarly, for seminar fees and share-related expenses, where ambiguity existed, interest was upheld, but no penalty was imposed due to the appellant's genuine belief.

3. Regarding stock broker service, entertainment expenses, and membership subscription expenses, the Tribunal acknowledged these as small amounts where the appellant did not dispute the interest payment. Despite the view that interest and penalty could be sustained for these services, the Tribunal invoked Section 80 of the Finance Act, 1994, due to the appellant's proactive approach in avoiding unnecessary disputes and litigation, waiving the penalty.

4. Ultimately, the Tribunal disposed of the appeal by upholding the demand for interest on services where credit was inadmissible, with the appellant agreeing to calculate and pay the same. The judgment reflected the Tribunal's consideration of the appellant's conduct in avoiding disputes and the waiver of penalty under Section 80, despite upholding interest payments for certain services.

5. The judgment highlighted the importance of bona fide belief in claiming credits and the significance of proactive measures to avoid unnecessary disputes, ultimately leading to a fair and balanced resolution in the appellant's favor.